Exploring and keeping readers up to date with the growing economic and political ties between China and South America. Including all the good stuff: Commodities, Energy, International Finance, South-South Cooperation, Microfinance and more

Thursday, May 15, 2008

As it stands, a “new economic order” is emerging as a global re-balancing of international economic power and influence occur. This “new economic order,” to be described in this working paper can be largely attributed to the increasing importance and presence of emerging markets in the world economy and inter-emerging market cooperation. Accounting for only the populations of the four largest developing nations; Brazil, Russia, India and China (BRIC countries), roughly 2.7 billion economic agents have become active competitors in the global economy. This research study focuses on the growth and cooperation of the emerging markets of China and the South American commodity exporting countries of Peru, Chile, Colombia, Brazil, Argentina and Venezuela, and, how to understand their cooperation the ramifications in the field of international investing..

Chinese expansion in the fields of trade and investment in South America, the general growth in Sino-South American relations and in particular, the countries of focus in this paper, has greatly altered the expectations of many economist and investors around the world. Economists and international investors have responded through creating new international models for their respective fields. For instance, many within the investment community have developed alternative investment strategies and portfolio diversification strategies with a international focus. Strategies, typically consider international factors such as market volatility, political risks, growth forecasts, and or advancements in technology—all of which are important indicators which help investors identify a strategic mix of investments in which to construct an international portfolio.

A unique aspect behind China's emergence as a global economic power, is that China remains (by western standards) a developing country, home to over 350-400 million people living below the international poverty. Never the less, China has managed to achieve global recognition while still being classified as an emerging market. With hundreds of millions in China yet to benefit, the country's economic growth and development is far from complete. Furthermore, China's recent materialization as the world’s second largest economy (in PPP terms) provides a clear message; no developed or developing country can afford to ignore or marginalize the affects of China's rapid economic growth (Colombia Futures Group; 2005). Referred to by many as; “the work shop of the world,” China has is now a major center of economic activity with ample capacity to further expand its influence and position.

Emerging markets such as China and India, both of which have over a billion people, evolve and become new engines of global growth—much like North America and Western Europe. Additionally, in light of globalization and ever increasing levels of international commerce and production matrices, emerging market cooperation has developed into its own respective engine of growth for developing countries—facilitating the rise of commercial exchange between regions which may have previously had little or no connections with one another, as China and South America have (Estevadeordal; 2006).

In response to the ever-increasing interconnectivity of economic activity in the world economy, emerging markets have managed to develop both their domestic capacities and establish significant levels commercial exchange with other emerging markets. When the global credit crises of late 2007-2008 emerged, it led to world-wide market corrections in developed countries real estate, banking, and financial sectors. The developing world, including the countries in this research, in part, where able to use their domestic and regional economies to compensate for the adverse effects of economic slowdown or recession in the US.

Despite problems which need to be addressed in the global economy, emerging markets discussed here show signs they will achieve favorable growth in 2008 and for the next few years to come. The countries of focus in this research all managed to achieve very positive growth rates in 2007. GDP growth rate data from 2006 and 2007, has been adquired from Bloomberg L.P reports. China achieved avg GDP growth of 10.7% over 2007. While, in South America GDP growth were calculated as: Peru 9%, Chile 5.2%, Colombia 7.8%, Brazil 4.8%, Argentina 8.7% and Venezuela 8.4%.

In 1970, two-way trade between China and all of Latin America, which includes Central America and the Caribbean region, was reported to be a meager $150 million. Additionally the majority of this exchange occurred between China and Cuba, largely because of ideological. In 1980, the figure had begun to change drastically, increasing 1000% o ver ten years to $1.5 billion (Li; 38-39). From 1984-2004, Chinese commodity imports from Latin America surged by a factor of 20. By 2005 two-way trade between the regions had increased another 900%, growing to over $50 billion. Trade data from 2004, provided by the International Monetary Funds direction of trade statistics estimates the total value of Chinese commodity imports at $200b USD (Santiso; 2007).

This blog will be a resource for all those interested in participating in exploring this new dynamic relationship.

Up to date news and relevant developments from reputable news agencies will be posted when they pertain to this growing cooperation and the emerging markets of South America and China.